The Northern Ireland economy reported 0.6% growth in the three months to February, leading growth outside of London, according to the latest edition of PwC’s UK Economic Outlook. This was due to Northern Ireland’s relatively high share of sectors experiencing growth like health, retail and construction.
All of the UK’s nations and regions have reported growth in the three months to February, however, growth was slower across the North of England and Midlands, partly due to ongoing post-pandemic issues affecting the manufacturing sector and related supply chains.
Below: UK real GVA growth estimates, by UK region, Dec 2022 to Feb 2023
The UK is expected to avoid recession in 2023, with PwC’s UK economics team expecting to see around 0.1% growth in 2023 and 1% growth in 2024, rising to 1.6% by end of 2025 as inflation pressures start to significantly ease over coming months.
Despite this improved outlook, however, the report notes that the UK’s recovery is lagging behind its G7 peers. The UK’s high levels of labour inactivity for over-50s is a key driver.
The report also forecasts inflation to begin to significantly decrease over coming months and return to the Bank of England’s target of 2% by the end of 2024. Despite this, however, inflation may remain higher in certain key areas - such as food and services - and this may mean the cost of living pressures will continue to be experienced differently across households.
Greg Boyd, economist at PwC Northern Ireland, says:
“It’s positive to see that NI has seen economic growth so far this year and we are on track to avoid a recession, alongside easing inflationary pressures. The potential increased certainty following the Windsor Framework is also expected to help future growth in Northern Ireland.
“Our analysis suggests the UK has passed through the eye of the inflationary storm compared to last year, particularly with wholesale energy costs expected to stabilise. But the strength of any economic recovery is subject to risks which could include future geo-political shocks, persistently higher inflation pressures and a weaker sterling. Cumulatively, we expect prices by the end of next year to be 20% higher than they were at the start of 2021, meaning businesses and households will continue to feel cost pressures.
“We also know that the impact of this cumulative price increase is felt more profoundly in NI due to lower household incomes here and because NI households spend more proportionally on energy and food, the key drivers of inflation. There needs to be a continued focus on longer-term levers for economic growth here, including stimulating investment, getting more people into work, and underpinning all of this with support for skills and education.”